A friend of mine who would prefer not to be named sent me a note a couple of months ago, when the Libor scandal at Barclays was hitting a crescendo, that captured the prevailing mood perfectly.
Did I find it ironic, he asked, that bankers can harm millions of ordinary citizens, destroy entire communities, force taxpayers to foot huge bills to save their companies -- and almost nobody goes to jail? But when it's discovered that bankers were cheating other bankers? Oh well, now someone has to go to jail. He certainly had a point.
And maybe someone will. As a Bloomberg View editorial noted this week, the Libor scandal should give U.S. prosecutors a chance to put some bankers at too-big-to-fail financial institutions in jail for something. If prosecutors want to, that is. We're still waiting to see if or when anyone at the Justice Department will follow through with arrests or indictments.
As for the U.K., here's a possible explanation for why regulators there have been so slow to pinch anyone for Libor-related manipulations. Check out the latest Bloomberg News stories detailing some of the juicy electronic messages exchanged among traders at Royal Bank of Scotland Group Plc, the bailed-out ward of the state that's 81 percent owned by the British government.
The transcripts were included in a 231-page affidavit filed by Tan Chi Min, a former RBS trader who is suing the bank for wrongful dismissal in a Singapore court. A sample: "Nice Libor," Tan wrote in an April 2008 instant message to colleagues. "Our six-month fixing moved the entire fixing, hahaha." Another one from an August 2007 conversation with traders at other banks, including Deutsche Bank: "It's just amazing how Libor fixing can make you that much money or lose if opposite," Tan wrote. "It's a cartel now in London."
Tan has said in his lawsuit that the bank condoned rates manipulation and sought scapegoats in an internal probe. RBS asked the Singapore High Court to seal the papers temporarily, until at least one of the probes of the bank by U.S. or U.K. government agencies is completed. Thank goodness for the openness and transparency of the court system in Singapore, of all places, so the world can get a peek inside Britain's third-biggest lender.
Libor-scandal aficionados may recall it was the U.S. Commodity Futures Trading Commission that has been the driving force on the Libor investigations. Were it not for the persistence of the scrappy, underfunded CFTC, there probably would have been no fines at Barclays Plc, Britain's second-biggest lender, which paid about $470 million to U.S. and British authorities in June for rigging the London interbank offered rate. U.K. authorities, particularly the Financial Services Authority, seemed to be slow-footed.
RBS is one of at least a dozen banks being investigated over allegations that they colluded to manipulate Libor so they could profit from bets on interest-rate derivatives. It's understandable why the British government might not be keen about investigating itself, or competitors that engaged in the same offenses.
As Christopher Cox said in December 2008 during one of his final speeches as chairman of the U.S. Securities and Exchange Commission: "When the government becomes both referee and player, the game changes rather dramatically for every other participant. Rules that might be rigorously applied to private-sector competitors will not necessarily be applied in the same way to the sovereign who makes the rules."
He told us so.
(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)
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